ArticuLaw Primo
LSPU-LAW STAR CLASS
Rule 88
PAYMENT OF THE DEBTS OF THE ESTATE
Prepared by: Nelia M. Oro
Section 1-DEBTS IS PAID IN FULL IF THE ESTATE IS SUFFICIENT
A writ of execution is not the proper procedure to satisfy the debts. The court shall order the SALE OR MORTGAGE of the properties of the decedent. The proceeds of which will satisfy the debts and expenses.
Question - ls the remedy of execution available in favor of a creditor against the estate of a decedent? Why?
Ans: No, because the procedure outlined by law is the sale of personal property or the sale of mortgage of real property of the decedent and the debts shall be paid out of said proceeds.
GEN. RULE: Payment of the debts of the estate must be taken in the following order of preference:
1.From the portion or property designated in the will,
2.From the personal property, and
3.From the real property
Exception: The court, on petition of interested parties may modify such order of disposition.
Section 2-PART OF ESTATE FROM WHICH DEBT PAID WHEN PROVISION MADE BY WILL
If the testator makes a provision in his will or designates the estate to be appropriated for the payment of his debts that will be followed.
But if it not sufficient, such part of the estate is not disposed of by will, if any, shall be appropriated for that purpose.
Section 3. PERSONALTY FIRST CHARGEABLE FOR DEBTS, THEN REALTY
TWO (2) INSTANCES WHEN REALTY IS LIABLE FOR DEBTS AND EXPENSES
1. When the personal estate of the decedent is not sufficient for that purpose,
2. When the sale of such personalty would be for the detriment of the participants of the estate.
Section 4- ESTATE TO BE RETAINED TO MEET CONTINGENT CLAIMS
If the court is satisfied that the contingent claim duly filed is valid. It may order the executor or administrator to retain in his hands a sufficient part of the estate to pay a portion equal to the dividend of the creditors.
Requisites:
1. Contingent Claim is duly filed;
2. Court is satisfied that the claim is valid; and
3. The claim has become absolute.
Section 5-HOW CONTINGENT CLAIM BECOMING ABSOLUTE IN TWO YEARS ALLOWED AND PAID
1. If such contingent claim becomes absolute and is presented to the court as an absolute claim within two years from the time allowed for the presentation of claims, it will be paid in the same manner as the other absolute claims.
2. If the contingent claim matures after the expiration of two years, the creditors may sue distributees, who are liable in proportion to the shares in the estate respectively received by them.
Note: The contingent claims must first have been established and allowed in the probate court before the creditors can file an action directly against the distributees.
Section 6- COURT TO FIX CONTRIBUTIVE SHARES WHERE DEVISEES, LEGATEES OR HEIRS HAVE
The heirs and distributees are liable individually for payment of all lawful outstanding claims against the estate in proportion to the amount or value of the property they have respectively received from the estate.
Section 7-ORDER OF PAYMENT IF ESTATE IS INSOLVENT
If estate is insolvent, as in liabilities are more than the assets, Sec.7 in relation to Art. 1059 and 2239 to 2251 of the Civil Code (Concurrence and Preference of Credits) must apply.
Section 8- DIVIDENDS TO BE PAID IN PROPORTION TO CLAIMS
If there are no assets sufficient to pay the credits of any one class of creditors after paying the credits entitled to preference over it, each creditor within such class shall be paid a dividend in proportion to his claim. No creditor of any one class shall receive any payment until those of the preceding class are paid.
Section 9- Estate of insolvent non-resident, how disposed of.
In case administration is taken in the Philippine of the estate of a person who was at the time of his death an inhabitant of another country, and who died insolvent, hi estate found in the Philippines shall, as far as practicable, be so disposed of that his creditors here and elsewhere may receive each an equal share, in proportion to their respective credits.
Section 10. When and how claim proved outside the Philippines against insolvent resident's estate paid
Claims proven outside the Philippines where the executor had knowledge and opportunity to contest its allowance therein may be added to the list of the claims in the Philippines against the estate of an INSOLVENT RESIDENT and the estate will be distributed equally among those creditors.
Principle of Reciprocity_ the benefits of Sections 9 and 10 cannot be extended to the creditors in another country if the property of such deceased there found is not equally apportioned to the creditors residing in the Philippines.
Section 11-Order for payment of debts
Before the expiration of the time limited for the payment of the debts, the court shall order the payment thereof, and the distribution of the assets received by the executor or administrator for that purpose among the creditors, as the circumstances of the estate require and in accordance with the provisions of this rule.
Section 12. Orders relating to payment of debts where appeal is taken.
If an appeal has been taken from a decision of the court concerning a claim, the court may suspend the order for the payment of the debts or may order the distributions among the creditors whose claims are definitely allowed, leaving in the hands of the executor or administrator sufficient assets to pay the claim disputed and appealed. When a disputed claim is finally settled the court having jurisdiction of the estate shall order the same to be paid out of the assets retained to the same extent and in the same proportion with the claims of other creditors.
Section 13. When subsequent distribution of assets ordered
CONDITIONS:
1. Whole of the debts are not paid;
2. Whole assets are not distributed, or other assets afterwards come to the hands of the executor or administrator.
Section 14. Creditors to be paid in accordance with terms of order
When an order is made for the distribution of assets among the creditors, the executor or administration shall, as soon as the time of payment arrives, pay the creditors the amounts of their claims, or the dividend thereon, in accordance with the terms of such order.
Section 15. Time for paying debts and legacies fixed, or extended after notice, within what periods
Shall not exceed 1 year in the first instance.
But the court may extend period on application or executor or administrator and after hearing and notice on the following conditions:
1. The extension must not exceed 6 months for single extension.
2. The whole period allowed to the original executor or administrator shall not exceed 2 years.
Note: The extension may be granted by the court taking into account to the distribution of the estate
Section 16. Successor of dead executor or administrator may have time extended on notice within certain period
Successor of deceased executor or administrator may be given an extension not to exceed 6 months.
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